Samuelson et al Economics, (vol 2 macroeconomics) third Australian edition, 1992.

This is important because it would have reached many students who did not continue on to further study and so the views expressed in it would tend to become the conventional wisdom in the community at large.

Todaro and Smith Economic Development, eighth edition, 2003.

This is more up to date and it should represent something like the state of the art, produced by people who have devoted their whole careers to the close study of these issues and to the critical appraisal of the various rival theories in the field.

Comments on Samuelson et al.

They list the four central factors in economic development:

1. Human resources, including supply and education.
2. Natural resources.
3. Capital formation (machines, factories, roads).
4. Technology (science, engineering, management, entrepreneurship).

There is no mention of the institutional framework, free trade, property rights and the structure of incentives to produce for the benefit of consumers rather than the tax collector or crony capitalists.

They suggest that the best brains should be sent overseas to pick up the latest advances, but of in fact the best brains tended to go away and come back as nationalists, socialists and worse (Pol Pot studied in Paris under JP “don’t talk about the gulags” Sartre).

Tragically, the new states mostly decolonised in the immediate post WWII period when the faith in socialism, nationalization of industries and central planning was at a peak and the economics profession was stepped in Keynesian macroeconomics as a handmaiden of planning and dirigisme (steering the economy).

Under the heading of ‘comprehensive theories’ to account for differences in economic growth they note theories about climate, the Protestant ethic, rigid oligarchies. In critical commentary they wrote “Where is the Protestant ethic in a sleek Japanese factory? How can we explain that a country like Japan, with a rigid social structure and powerful lobbies in many sectors, has become the world’s most productive economy?”.

I would have thought that the work ethic (a significant part of the Protestant ethic) was clearly apparent in Japanese factories. And they spoke too soon about the productivity of the Japanese economy. By the time the book was published the Japan was two years into the recession that lasted almost up to the present time.

In a table depicting the vicious cycle of underdevelopment there are four boxes. Admittedly one of the boxes is Low Productivity and the others are Low Average Incomes, Low saving and investment, Low pace of capital accumulation. But there is no hint about the political, social and cultural institutions and incentives that make for productivity. Consequently the readers would be left completely in the dark about the mix of policies required for success and the reasons for the failure of aid efforts in the past. This is hardly surprising in view of Samuelson’s absurd misreading of the performance of the Soviet economy until the fall of the wall revealed what should have been clear enough to observers who were not blinded by their own theories.

Moving on to Todaro and Smith (2003)

This is the eighth edition of Economic Development, a comprehensive text that is supposed to represent the state of the art in studies of development and a critical review of the leading theories in the field.

The key chapter is Chapter 4: Classic Theories of Development: A Comparative Analysis

This covers four groups of theories:

1. Linear stages of growth models, whereby the developing nations are supposed to replicate the process of development that occurred in the west.

2. Patterns of structural change, using modern economic theory and statistical analysis to portray the process of structural change that is required for progress.

3. International dependence, including the Marxist exploitation theories. This is a radical critique that gained strength in the 1970′s reflecting the post-Vietnam ideological shift on campuses and frustration with the lack of progress since WW2.

4. The neoclassical, free-market counter-revolution.

The authors adopt the rather odd stance that the fourth group of theories assumed prominence in the 1980s as a result of the ascendancy of conservative governments in the west. In fact this line of thought existed from the 1940s in the works of Peter Bauer and others, and the cogency of its arguments has nothing to do with the political situation in the west.

The objections that the authors raise are mostly carping: the conditions in the third world are "not congenial for free markets". Doh! They confuse the descriptive and normative stance and pretend that the absence of competition, rule of law etc represent a case against the market liberal approach.

Instead of pointing out that the absence of the appropriate conditions  raises a budget of issues that need to be addressed to obtain progress, they make out that the theories themselves are defective.

It seems that they are so determined to appear fair and even-handed in their treatment of all the theories that they cannot do justice to the market liberal approach. They raise the familiar canard about the supposed lapse from free market grace of some Asian tigers, without reference to the counter-arguments that the success of those nations was inversely related to the extent of state interference. Taiwan and South Korea succeeded despite state intervention (boo to the neoliberals) but finer analysis indicated that state intervention was not the active ingredient in the policy mix.

The end result is simply confusing for students who are required to take seriously the absurd ideological posturing of the radicals and the unhelpful formalism that pervades the presentation throughout the book.

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Critical Comments on two textbooks, ready to hand during a debate on Third World development.
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